Download FCS3450Fall2013Test1

Personal Finance 1200 Fall 2013 Exam #1 Section 1
True / False Questions
1. Inflation reduces the buying power of money.
2. Opportunity costs refer to what a person gives up when making a decision.
3. Analyzing your current financial position is a part of the first stage of the financial planning
process.
Multiple Choice Questions
4. With an inflation rate of 9 percent, prices would double in about ___________ years.
A. 4
B. 6
C. 8
D. 10
E. 12
5. The stages that an individual goes through based on age, financial needs, and family
situation is called the:
A. financial planning process.
B. budgeting procedure.
C. personal economic cycle.
D. adult life cycle.
E. tax planning process.
6. The ability to convert financial resources into usable cash with ease is referred to as:
A. bankruptcy.
B. liquidity.
C. investing.
D. saving.
E. opportunity cost.
7. As Jean Tyler plans to set aside funds for her young children's college education, she is
setting a(n) ____________ goal.
A. intermediate
B. long-term
C. short-term
D. intangible
E. durable
1
Personal Finance 1200 Fall 2013 Exam #1 Section 1
8. Opportunity cost refers to:
A. money needed for major consumer purchases.
B. what a person gives up by making a choice.
C. the amount paid for taxes when a purchase is made.
D. current interest rates.
E. evaluating different alternatives for financial decisions.
9. If a person deposited $50 a month for 6 years earning 8 percent, this would involve what
type of computation?
A. simple interest
B. future value of a single amount
C. future value of a series of deposits
D. present value of a single amount
E. present value of a series of deposits
10. Which type of computation would a person use to determine current value of a desired
amount for the future?
A. simple interest
B. future value of a single amount
C. future value of a series of deposits
D. present value of a single amount
E. present value of a series of deposits
11. If inflation is increasing at 3 percent per year, and your salary increases at the same rate,
how long will it take your salary to double?
A. 30 years
B. 24 years
C. 18 years
D. 12 years
E. 6 years
2
Personal Finance 1200 Fall 2013 Exam #1 Section 1
12. If you put $1,000 in a saving account and make no further deposits, what type of
calculation would provide you with the value of the account in 20 years?
A. future value of a single amount
B. simple interest
C. present value of a single amount
D. present value of a series of deposits
E. future value of a series of deposits
13. Which of the following is an example of opportunity cost?
A. renting an apartment near school
B. saving money instead of taking a vacation
C. setting aside money for paying income tax
D. purchasing automobile insurance
E. using a personal computer for financial planning
14. The financial planning process concludes with efforts to:
A. develop financial goals.
B. create a financial plan of action.
C. analyze your current personal and financial situation.
D. review the financial plan.
E. review and revise your actions.
15. When prices are rising at a rate of 3 percent, the cost of products and services would
double in ______ years.
A. 3
B. 6
C. 12
D. 24
E. 36
16. The annual price increase for consumer goods and services measured by the Bureau of
Labor Statistics is referred called ________.
A. deflation
B. inflation
C. the consumer price index
D. the price calculator
E. goods and all of the above
3
Personal Finance 1200 Fall 2013 Exam #1 Section 1
17. Barb Hotchkins is in the 28 percent tax bracket. A tax-exempt employee benefit with a
value of $500 would have a tax-equivalent value of:
A. $694.
B. $528.
C. $500.
D. $360.
E. $140.
18. Federal tax-deferred employee benefits are:
A. not subject to federal income tax.
B. not subject to state income tax.
C. taxed at some future time.
D. are taxed at a special rate.
E. only available to union employees.
19. Caroline lives in City A and earns $50,000 per year. The cost of living index in City A is
.8. She is considering a move to City B which has a cost of living index of .9. How large a
salary will she require in City B to maintain her current standard of living?
A. $44,444
B. $40,000
C. $56,250
D. $45,000
E. $50,000
20. Joseph is eligible for a nontaxable life insurance benefit with an annual premium of $400
paid entirely by his employer. Assuming Joseph is in a 25% bracket, how much would he
have to earn to pay for this benefit with after-tax dollars?
A. $425.00
B. $533.33
C. $433.33
D. $500.00
E. $400.00
True / False Questions
21. Financial records that are referred to on a regular basis should be kept in a safe-deposit
box.
22. A budget is a specific plan of how a person or family expects to spend their money.
4
Personal Finance 1200 Fall 2013 Exam #1 Section 1
23. A personal balance sheet reports your income and expenses.
24. A person's net worth is the difference between the value of the items owned and the
amounts owed to others.
25. If expenses for a month are greater than income, an increase in net worth will result.
Multiple Choice Questions
26. Opportunity costs refer to:
A. current spending habits.
B. changing economic conditions that affect a person's cost of living.
C. storage facilities to make financial documents easily available.
D. trade-offs associated with financial decisions.
E. avoiding the use of consumer credit.
27. Which of the following are considered to be personal financial statements?
A. budget and credit card statements
B. balance sheet and cash flow statement
C. checkbook and budget
D. tax returns
E. bank statement and savings passbook
28. A personal balance sheet presents:
A. amounts budgeted for spending.
B. income and expenses for a period of time.
C. earnings on savings and investments.
D. items owned and amounts owed.
E. family financial goals.
29. The current financial position (including net worth) of an individual or family is best
presented with the use of a(n):
A. budget.
B. cash flow statement.
C. balance sheet.
D. bank statement.
E. time value of money report.
30. A family with $45,000 in assets and $22,000 of liabilities would have a net worth of:
A. $45,000.
B. $23,000.
C. $22,000.
D. $67,000.
E. $41,000.
5
Personal Finance 1200 Fall 2013 Exam #1 Section 1
31. Items that you own with a monetary worth are referred to as:
A. liabilities.
B. variable expenses.
C. net worth.
D. income.
E. assets.
32. Liabilities are amounts representing:
A. debts.
B. items of value.
C. living expenses.
D. taxable income.
E. current assets.
33. A person's net worth would increase as a result of:
A. reduced amounts owed to others.
B. reduced earnings.
C. increased spending for current living expenses.
D. decreased value of personal possessions.
E. decreased value of investments.
34. A cash flow statement reports a person's or a family's:
A. net worth.
B. current income and payments.
C. plan for spending.
D. value of investments.
E. balance of savings.
35. Total earnings of a person minus the deductions for taxes and other items is called:
A. budgeted income.
B. gross pay.
C. net worth.
D. total revenue.
E. take-home pay.
36. Payments that do not vary from month to month are ____________ expenses.
A. fixed
B. usage
C. variable
D. luxury
E. output
6
Personal Finance 1200 Fall 2013 Exam #1 Section 1
37. During the past month, Jennifer Ernet had income of $3,000. During the month, her net
worth declined by $200. If no other financial activities occurred, this means Jennifer's
payments for the month were:
A. $3,200.
B. $3,000.
C. $2,800.
D. $200.
E. $0.
38. Which one of the following should be budgeted first?
A. variable expenses
B. vacation expenses
C. fixed expenses
D. unplanned living expenses
E. recreation expenses
39. If a family planned to spend $370 for food during March but only spent $348, this
difference would be referred to as a:
A. variance.
B. deficit.
C. fixed living expense.
D. budget reduction.
E. contribution to net worth.
40. A budget deficit would result when a person's or family's:
A. actual expenses are less than planned expenses.
B. actual expenses are greater than planned expenses.
C. actual expenses equal planned expenses.
D. assets exceed liabilities.
E. net worth decreases.
41. Kyle Burroughs has decided to put $25 more per week in his savings account. He knows
this will reduce his ability to go out to eat each week but thinks building his savings is
important. This would be an example of:
A. a budget variance.
B. an opportunity cost.
C. a balance sheet.
D. an accounting error.
E. a budget anomaly.
7
Personal Finance 1200 Fall 2013 Exam #1 Section 1
42. Karen Price has created a financial statement for herself that lists all of the assets she owns
as well as the debts she owes. This would be an example of:
A. money management.
B. opportunity cost analysis.
C. a balance sheet.
D. a liquidation exercise.
E. a budget variance.
43. Patricia McDonald has determined that the value of her liquid assets is $4,500, the value
of her real estate is $128,000, the value of her personal possessions is $62,000, and the value
of her investment assets is $73,000. She has also determined the value of her current liabilities
is $7,500 and the value of her long term liabilities is $98,000. What is Patricia's net worth?
A. $267,500
B. $105,500
C. $162,000
D. $205,500
E. $132,000
44. A family has a net worth of $156,000 and liabilities of $167,000, what is the amount of
their assets?
A. $11,000
B. $156,000
C. $167,000
D. $323,000
E. $452,000
45. This month, Ken Grossman has cash inflows of $3,100 and cash outflows of $2,950,
resulting in a
A. balanced budget.
B. surplus of $150.
C. deficit of $150.
D. surplus of $3,100.
E. deficit of $2,950.
46. Allen Arnold has determined that the amount of money he spends on his mortgage
payment, car insurance payment, and cable bill totals $1,200 each month. What type of
expenses has Allen determined with this calculation?
A. current liabilities
B. long Term liabilities
C. net worth
D. variable expenses
E. fixed expenses
8
Personal Finance 1200 Fall 2013 Exam #1 Section 1
47. For January, Bethany DeWeese had cash inflows of $4,200 and cash outflows of $4,750,
resulting in a
A. balanced budget.
B. surplus of $550.
C. deficit of $550.
D. surplus of $8,950.
E. deficit of $4,750.
True / False Questions
48. A state may impose a personal property tax.
49. An estate tax is imposed on the value of an individual's property at the time of his or her
death.
50. An exclusion is earnings not included in taxable income.
51. Exemptions are deductions for yourself, your spouse, and qualified dependents that you
can deduct from adjusted gross income.
52. A tax credit is an amount subtracted directly from the amount of taxes owed.
Multiple Choice Questions
53. Taxable income is used to compute a person's:
A. exemptions.
B. income tax.
C. deductions.
D. capital gains.
E. exclusions.
54. A taxpayer with a taxable income of $47,856 and a total tax bill of $5,889 would have an
average tax rate of ____ percent.
A. 8.6
B. 10.3
C. 12.3
D. 14.2
E. 16.7
55. Which one of the following is not included in gross income?
A. Tax credit.
B. Exemption.
C. Exclusion.
D. Earned income.
E. Portfolio income.
9
Personal Finance 1200 Fall 2013 Exam #1 Section 1
56. Which of the following would be deducted from gross income to obtain adjusted gross
income?
A. alimony payments
B. mortgage interest
C. medical expenses
D. foreign income exclusion
E. charitable contributions
57. A deduction from adjusted gross income for yourself, your spouse, and qualified
dependents is:
A. the standard deduction.
B. a tax credit.
C. an itemized deduction.
D. an exclusion.
E. an exemption.
58. For a dependent to qualify as an exemption, he or she must:
A. be married.
B. be under age 16.
C. be registered in school.
D. receive more than one half of his or her support from the taxpayer.
59. A tax ____________ is an amount subtracted directly from the amount of taxes owed.
A. credit
B. exemption
C. deduction
D. exclusion
E. shelter
60. A tax credit of $50 for a person in a 28 percent tax bracket would reduce a person's taxes
by:
A. $10.
B. $28.
C. $14.
D. $50.
E. $35.
61. The state of Oklahoma imposes a tax of $.17 per gallon on gasoline. What type of tax is
this most likely to be?
A. general sales tax
B. excise tax
C. personal property tax
D. income tax
E. estate tax
10